ARTICLE | November 15, 2023
Your products and services are popular, your marketing is on point, your sales are strong. What could possibly go wrong? Collections. Even small businesses that are otherwise performing well sometimes struggle with cash flow because their collections process is outdated and inefficient.
Here are five tips to improve your collections process.
Tip #1: Analyze Your Existing Collections Process
The first step is to take a look at your existing collections process, beginning with the question of whether you have a formal process in place. If not, what are the ad-hoc processes? If there is a structured process, who is involved in it and what parts of it are working and not working?
Take time to interview the employees who are currently involved in collections so you can understand what they’re doing, what they like and don’t like, and which steps are taking too much time or distracting them from other important projects.
Tip #2: Upgrade Your Accounting Software
If you’re having problems with collections, odds are you’re using a manual process in which employees manually create, send, and follow up on invoices. Manual collections processes are time-consuming, and they almost inevitably lead to errors and oversights that can disrupt your cash flow and frustrate your vendors and clients.
A best-in-class cloud-based accounting software solution like Sage Intacct has many benefits—including automating and streamlining the collections process. Instead of manually sending emails and following up with phone calls, you can have Sage Intacct automatically send dunning notices. That saves employees time, and it gives you more visibility because the whole process takes place and is recorded within your Sage Intacct system.
Tip #3: Clarify Expectations
To ensure on-time payments, make sure that your existing and new clients and vendors are on the same page as you regarding payment deadlines, amounts due, and preferred payment methods. Setting clear expectations is especially important with those who have had overdue payments in the past.
Tip #4: Act Fast on Past-Due Receivables
The longer receivables go uncollected, the less likely they are to ever be collected, in full or part. With that in mind, it’s important to recognize past-due receivables right away and send an immediate reminder to the client or vendor.
This is another area in which an automated financial management solution like Sage Intacct can help. You can send automated emails based on invoice creation or the past-due date, and you can set up different email templates for each collection attempt. Sage Intacct also makes it easy to track customer promise-to-pay dates and set reminders to resume dunning immediately after those promised dates lapse.
Insero & Co. is a public accounting firm with decades of experience working with businesses and nonprofits of all sizes. Our experienced experts provide personalized support and guidance to small businesses, including helping them take advantage of the latest accounting and financial management solutions.
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Call us at (800) 232-9547 or fill out the form below and we’ll contact you to discuss your specific situation.